Consumer Energy Alliance

Consumer Energy Alliance (CEA) is a nonprofit, nonpartisan organization created to help expand the dialogue between the energy and consuming sectors to improve understanding of energy security, more effectively develop and use both renewable and oil & gas energy resources in an environmentally conscious manner, create sound energy policy and maintain stable energy prices for consumers.

Statement by Dave Harbour, Public Meeting, 5-Year Program, Anchorage, AK, April 14, 2009

Good Morning, Mr. Secretary:

Today I speak in support of the proposed 2010-2015, 5-year Leasing Program as a member of the Consumer Energy Alliance Board of Advisors whose broad constituency is already known in this record.[1] I accepted that volunteer board assignment last year after retiring as a commissioner of the Regulatory Commission of Alaska and serving on the natural gas committees of both the Western Conference of Public Service Commissioners and the National Association of Regulatory Utility Commissioners (NARUC). In the NARUC capacity I also served as an official representative to the Interstate Oil and Gas Compact Commission. More importantly, I obtained my High School and College diplomas in your home state of Colorado, and my brother’s large family still lives there even though I defected to this more majestic state nearly 40 years ago.

Mr. Secretary I am deeply respectful of this process you have undertaken; in less capable or less dedicated hands, it could have produced a political or poorly filtered result. As it is, I believe your record will be enhanced along with your personal understanding of OCS issues and citizen perceptions. You are the 50^th Secretary of the Interior; symbolically, this process can give confidence to citizens of all 50 states who depend on your able management America’s Federal lands.

I would especially associate myself and the consumer interests I always strive to represent with the remarks you invited last week in New Orleans from Gulf state elected officials.

Senator Mary Landrieu eloquently complimented you for your emphasis on protecting America’s national security. She described the importance to place on independent producers as the Administration develops leasing and taxing policy. I would add that millions of our neighbors participate in IRAs, 401Ks and government pension programs that invest in the larger oil companies. Accordingly, tax and leasing policies should be justly and equally reasonable for independent companies’ investors and for large oil companies’ investors. All investors are American citizen consumers. Tax and leasing policies should focus on producing more wealth and domestic energy for America–whether the instruments of such production are small or large companies.
Congressman Charles Boustany stressed the importance of having reasonable oil and gas policies to support the transition toward a more renewable future and jobs of millions of blue and white collar workers.
Congressman Charlie Melancon reported that the fishing was good near man-made oil rig reefs and that the desirable alternative energy industries would supplement but not replace oil and gas energy.
Congressman Joseph Cao conscientiously discussed the importance of environmental monitoring and of an American Energy Alliance report projecting the value of OCS economics to be greater than the recent, combined stimulus packages.
Congressman Bill Cassidy verified the low unemployment rates existing in oil and gas producing areas and the environmental values to be gained by producing domestic OCS oil and gas resources.

I found during my regulatory service, Mr. Secretary, that my role might have had one thing in common with your own. My job was to seek just and reasonable rates for utility consumers and pipeline shippers, while providing the utility and pipeline companies the opportunity but not the guarantee of making a fair return on and of their investments. I think that at the end of the day you must also be carefully finding that your role as America’s landlord involves striking a balance between the multiple potential uses our Federal lands offer to this generation of citizens with the requirement for husbanding those resources for future generations.

As a former commissioner and faithful advocate of consumer interests, I have some good news for you: the energy and environmental values competing for your attention are not all mutually exclusive. I know that as my brother’s family members sit down to dinner tonight in Lamar, Colorado, they will want America to carefully husband its common resources. But I also know my brother’s family–like millions of others–can only survive if secure and reasonable volumes of energy are available, if the country’s economy is strong and if our national defense is reliable.

I am confident that the Minerals Management Service and Bureau of Land Management–along with sister Federal and state agencies–can develop lease sales that both produce the wealth America needs and assure that technology used to produce that wealth will be maintained, as you have called for in your “four cornerstones” of a new energy policy.

I am further heartened that by virtue of these hearings you will be able to separate the volatile and vocal chaff from the proven and common sense wheat kernels. You have inherited a 67-thousand member bureaucracy and leasing/permitting processes that are the best in the world. If your staff aggressively conducts lease sales in a way designed to produce American wealth for American consumers, you should be confident that they can do it properly. If they do these things in the company of reasonable tax and incentive policies, America’s consumers could ask no more of the Department of Interior.

This multi-trillion dollar wealth producing OCS activity could be the single most important contribution you and President Obama can make to economic recovery that benefits consumers without burdening taxpayers!

By doing well what your department professionals have been hired to do, America can properly produce its offshore wealth in a way that will directly and quickly begin benefitting consumers everywhere. Beginning to explore for and then produce America’s trillions of cubic feet of clean burning natural gas resources and billions of barrels of prospective oil resources will transform America. Here is how America’s consumers will benefit and America will be transformed by an aggressive and responsible OCS program:

Over time, trillions of dollars of American wealth and millions of American jobs can be created;[2] there is no better economic stimulus than the creation and production of new energy wealth[3]
Domestic OCS production will provide an infusion of royalty dollars into the Federal treasury:
- Shared with adjacent states, the benefits will also flow directly to the local and state governments that support the infrastructure and services devoted to OCS activity.
- Federal and shared royalties will multiply their benefits as those receiving them pay ad valorem and income and sales taxes to different jurisdictions.[4]
America’s trend from 60% to 65% toward 70% + dependence on foreign sources of oil will reverse, with positive impacts on national security and security of supply and our balance of payments deficit and even on the value of our currency. Likewise, the new trend of becoming 2% then 5% then 10% and 15% (i.e. by 2020) dependent on imported LNG—as more and more natural gas is used for power production–could be moderated through domestic OCS gas production.
Since oil is a world commodity, new domestic discoveries could influence the world price in the favor of our consumers. Natural gas is a North American market commodity in process of becoming a world commodity, if LNG imports continue growing. As MMS leasing activity results in increased domestic natural gas production, so will the North American market forces likely produce more reasonable and less volatile prices for America’s consumers.

Mr. Secretary, America’s consumers as individual families, like my brother’s in Lamar, have not all been trained to understand the huge complex issues involved in energy economics. They rely on you to make sure that your decisions enable America to continue and to prosper as a nation. Let us remember that virtually every economic downturn in the last 50 years has followed a volatile increase in energy prices or supply shortages.[5] The very first consumers to be affected are the poor and those on fixed incomes. The consumers, therefore, who stand most to benefit from the 2010-15 OCS leasing program, are poor consumers and those on fixed incomes, from coast to coast. And, importantly, to the extent that we desire a more carbonless future by 2020, the lease sale action you take now and the energy tax advice you give the President will affect the transition fuel and national wealth needed to transport us into that brave new world.[6] A wise lease sale and energy tax policy will diminish the amounts Congress needs to appropriate to support programs like the Low Income Home Energy Assistance Program (LIHEAP).

I offer this concluding thought to you, Mr. Secretary: that Federal energy resources adjacent to Alaska and other OCS states can be properly and aggressively managed by your Department in such a way that natural values are reasonably protected and the economic strength of America is maintained for our citizens.

[1] CEA is a nonprofit, nonpartisan organization composed of consumers and energy providers that has long advocated for a comprehensive national energy policy that focuses on creating a diverse portfolio of energy supplies, from wind to solar to biofuels to petroleum and clean-burning natural gas.

[2] About 1.5 million people are directly employed by the oil and gas industry nationwide — with 45,000 people directly employed by offshore operations. Hundreds of thousands of others are employed by industries relying on petroleum feedstock. With the potential for offshore renewable energy production being explored in the new Five Year Plan, there are even greater possibilities for the creation of new jobs. In all, opening up the Outer Continental Shelf for energy development would undoubtedly support our local, state and national economies. In fact, a recent study found that developing areas of the OCS could generate $1.3 trillion for federal, state and local governments and as many as 160,000 jobs. If development were to occur in the Beaufort and Chukchi seas, alone, that could mean 35,000 jobs on an average annual basis, of which 6,000 would be direct jobs.

[3] The American Energy Alliance OCS Economic Study attempts to quantify OCS economic benefits: $8 trillion in economic output; $2.2 trillion in taxes; 1.2 million new jobs annually; and, $70 million in additional wages, annually.

[4] CEA fully endorses OCS revenue sharing of royalties, bonus bids, and fees with coastal states. Funding from the OCS would protect the US energy supply by ensuring the economic stability of the communities that sustain the activities necessary for energy production, supply and distribution, as well as helping to improve our schools, roads and other vital infrastructure. Since 1965, Congress has appropriated revenue from the OCS to help fund hundreds of grants in various states totaling millions of dollars and preserving thousands of acres through the Land and Water Conservation Fund. The federal government should recognize the contribution that coastal states make to US energy needs by passing legislation that mandates revenue sharing with states and local communities.

[5] “There is a direct link between access to domestic supplies of natural gas and oil and manufacturing employment. Between 2000, when energy prices began to climb, especially for natural gas, and mid 2008, prior to the onset of the financial crisis, the U.S. lost more than 3.7 million high-wage manufacturing jobs, which have compensation that is 20% more than the average national compensation package of $56,000 per year,” according to 2006 data from the National Assoc. of Manufacturers.

[6] Even with our emphasis on conservation and expanded renewable sources of energy, petroleum products and natural gas are projected to account for almost 65 percent of domestic energy consumption in 2025. The question is whether we obtain it domestically while expanding our wealth and security, or whether we obtain it at great cost from foreign governments willing to produce their own oil and gas.